Welcome to the September 2024 Innovating Payments Executive Summary—Gen Z Reaches Critical Juncture with Financial Institutions. In this issue, research reveals that Gen Z is moving away from big banks, making them more receptive to overtures from other financial institutions. Jack Henry announced a collaboration with Moov, a digital payments processor, to make digital payments services more available to small- and medium-sized businesses.
The Survey of Business Uncertainty, fielded by the Federal Reserve Bank of Atlanta in partnership with Steven Davis of the University of Chicago Booth School of Business and Nick Bloom of Stanford University, released its August 2024 summary. Also, in this issue, CFPB Director Rohit Chopra speaks to the need to promote competition in payments in his August 28 blog post. The National Cybersecurity Alliance and Infrastructure Security Agency (CISA) released their 2024 Guide for Cybersecurity Awareness Month, which contains free educational tools and resources. The event is held annually in October.
Finally, don’t miss NEACH’s 2024 Future of Payments Symposium, held Sept. 15-16, 2024, at the Hotel Viking Newport in Newport, RI. You can register here.
Read on to learn more.
Top Stories
Gen Z Reaches Critical Juncture with Financial Institutions
"In a Javelin digital banking report from 2022, more than 68% of Gen Z consumers said they banked with the five largest consumer-facing banks: Bank of America, Chase, PNC, Wells Fargo, and Capital One," stated a Sept. 3 article in Payments Journal. Gregory Magana, Digital Banking Analyst at Javelin Strategy & Research, says the percentage has dropped to 61% in his latest report, Gen Z: Building Mobile Banking for a Generation in Transition.
“You would expect that if Gen Z users started off with banks that have a ton of tech firepower and mobile resources, as the big banks do, there wouldn’t be any reason for them to leave,” Magana told Payments Journal. “Regardless of the reason, Gen Z is even more in play than two years ago. They’re at the point where they are the most receptive to any overtures that banks might make, such as low rates and innovative mobile tools.” However, this window won’t last forever, says Magana. Consumers aged 35 and older are less likely to change financial institutions than their younger counterparts.
Although they may not have settled on a primary financial institution, Gen Z is committed firmly to FinTechs. According to the article, 75% of Gen Z adults are plugged into financial service providers, with peer-to-peer payment apps like Venmo and Cash App topping the list. They are also deeply connected to third-party lenders and credit score monitoring platforms, making fintech a central part of their financial lives.
Also of interest, Gen Z also seeks financial guidance, which presents a significant opportunity for financial institutions. By offering easy-to-use financial fitness tools built into their apps, financial institutions can start building trust when a customer opens an account. While many financial institutions excel in customer service, they often miss the chance to provide these valuable resources during the crucial account opening process.
To learn more about opportunities like these, you can order a copy of the paid report, Gen Z: Building Mobile Banking for a Generation in Transition, from Javelin Research.
Jack Henry and Moov to Simplify Digital Payments for Small Businesses
Jack Henry™ announced a collaboration with Moov, a modern digital payments processor, to enable community and regional financial institutions to offer enhanced digital payment services to small and medium-sized business (SMB) customers.
The news release states, "The cloud-native service will allow SMBs to accept payments with the tap of a phone, receive same-day funds for accepted payments, and automate reconciliations to accounting software packages." Financial institutions will offer the service, empowering SMBs to better meet their clients’ deposit and payment needs.
"This innovation is made possible by our technology modernization strategy to offer community and regional financial institutions cloud-native, API-first services that allow them to differentiate strategically, compete successfully, and meet the evolving needs of their customers," said Jack Henry President and CEO Greg Adelsonin the release. "We are pleased to collaborate with Moov on this unique solution that will provide modern, innovative business payment capabilities to our clients that are seamlessly integrated with deposit and core banking services."
According to Jack Henry's 2024 Strategy Benchmark Survey, 78% of financial institutions plan to enhance their small business offerings within the next two years. Among these, nearly 70% are setting their sights on expanding payment services—indicating that payments are becoming a top priority in the SMB space.
The U.S. Federal Reserve
In other news, the Survey of Business Uncertainty, fielded by the Federal Reserve Bank of Atlanta in partnership with Steven Davis of the University of Chicago Booth School of Business and Nick Bloom of Stanford University, released its August 2024 summary.
Headline results, as noted in this month’s summary, include:
- Sales revenue growth expectations have returned to their pre-pandemic average.
- However, firms remain more uncertain about future sales growth than before the pandemic.
- Over 20 percent of panelists surveyed stated that their firms have slowed or stopped investment spending until after the election, while 13 percent have slowed or stopped hiring until after the election.
- Looking ahead to the November election, firms rank monetary, tax, and regulatory policies as the highest concerns.
To view charts of this month’s results compared to previous months, click here
CFPB
Promoting Competition in Payments
In an Aug 28 blog post, CFPB Director Rohit Chopra highlighted the need to promote competition in payments: “As consumers increasingly move and store their money using mobile device apps, we have seen a rise in Big Tech conglomerates extending their reach into banking and payments. There has been a recent market development that might affect the availability of payment apps for Americans who use Apple iOS devices.”
A CFPB report published last September analyzed the “tap-to-pay” market. It found that the makers of two mobile operating systems, Apple and Google, “impose regulations governing how financial companies and app developers offer secure payments using the “tap to pay” functionality. The “analysis showed that Apple’s regulations in the U.S. were very restrictive, blocking access to “tap-to-pay” functionality for popular payment apps, other than its own proprietary app, Apple Pay. This policy inhibits new innovations and consumer choice.”
Earlier this month, Apple announced that it would amend its regulations so developers can build apps to facilitate payments outside of Apple Pay and Apple Wallet, including “tap-to-pay” transactions, said Chopra. Developers will need to pay Apple fees and agree to other conditions, but the announcement did not detail those fees or conditions.
The CFPB is working to understand Apple's announcement further and determine whether it marks a “meaningful shift away from blocking competitive payments offerings from banks, credit unions, and technology companies other than Apple.”
Cybersecurity Awareness Month
National Cybersecurity Awareness Month, held annually in October, is less than a month away. To help raise awareness, the National Cybersecurity Alliance and Infrastructure Security Agency (CISA) recently released their 2024 Guide for Cybersecurity Awareness Month, which contains free educational tools and resources.
The theme for Cybersecurity Awareness Month 2024 is “Secure Our World,” which empowers everyone to understand simple ways to protect themselves, their families, and businesses from online threats.
The Guide includes:
- Pre-drafted social media posts and graphics
- A sample email announcement
- A sample press release
- Suggestions for how to build your campaign
- Tips for educating your community
- And more
You can click here for more information and to access these free resources.
NEACH
There are still a few days to register for NEACH’s 2024 Future of Payments Symposium, Sept. 15-16, 2024, at the Hotel Viking Newport in Newport, RI. This cornerstone event explores the ever-changing payments landscape. Topics include how institutions are adapting, repurposing resources, and planning for the long term.
Technology, strategic planning, customer needs, and regulatory constraints weave a colorful tapestry of considerations that the 2024 Future of Payments Symposium will help attendees unravel during this lively event.
You can view the agenda, sessions, and speakers here. Don’t miss this one-of-a-kind learning experience.
Register today!
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AUTHOR: Joe Casali, AAP, NCP
Executive Vice President
As the EVP of Payments Innovation for NEACH, Joe focuses on exploring innovative solutions and technologies that will help position members for success, both now and in the future. Connect with Joe to read more of his blogs, articles, and posts.
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